HOTR: LATAM files bankruptcy, latest COVID airline casualty; 1,100 aircraft involved

By the Leeham News Staff

May 26, 2020, © Leeham News: LATAM, the largest airline company in South America, filed for Chapter 11 bankruptcy today in New York.

LATAM operates more than 300 aircraft. This filing means more than 1,100 worldwide were operated by airlines seeking bankruptcy or administrative protections. The UK’s Flybe was already failing before COVID effectively shut down UK air travel.

Many others teeter on the edge, saved for the moment by government bailouts.

Below is LNA’s latest tally of aircraft.

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Mitsubishi SpaceJet retreat is the best news for Embraer in months

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By Scott Hamilton

Analysis

May 25, 2020, © Leeham News: Mitsubishi Heavy Industries (MHI) surprising retreat from its SpaceJet regional airliner program is the best news in months for beleaguered Embraer.

This takes pressure off the Brazilian manufacturer and gives it time to regroup after Boeing jilted it at the alter by walking away from a proposed joint venture.

Going into storage: four Mitsubishi MRJ90s at Moses Lake (WA). Photo: Mitsubishi.

MHI’s actions leave Embraer with a monopoly in the 76-100 seat arena vs new airplanes. The M90 SpaceJet is not a viable competitor to the E175-E1 or the struggling E175-E2. Embraer’s competition will be its own used jets, plus used Bombardier CRJ-700/900s.

Summary

  • Closing US operations entirely. Closing the recently opened engineering center in Montreal
  • Continued operation of the CRJ product support center in Montreal or relocation to Nagoya uncertain.
  • Major cost-cutting drive.
  • MHI wants to certify M90, then consider whether to proceed with M100.
  • M100 has MOUs for 495 aircraft.
  • MRJ90 was not certifiable due to design deficiencies.
  • Redesigned M90 meets certification requirements.
  • M90 is economically uncompetitive with E-Jet.
  • COVID-19 upends entire airline industry, casting doubt in MHI’s commitment to SpaceJet future.

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Pontifications: Aircraft values, lease rates plummet

By Scott Hamilton

May 25, 2020, © Leeham News: Aircraft lease rates continue to plummet as the virus crisis infects the airline industry.

In an update of its periodic look at rates, the UK advisory firm ISHKA last week looked at 5-year old aircraft. Monthly Rates plunged as much at 26%. Aircraft values dropped as much as 15% (22% for an ATR-72).

Since Jan. 1, the Boeing 777-200F lost only 2% of its value but lease rates dropped 11%, despite high demand for cargo airplanes now. The Airbus A350-900 lost 5% of its value but lease rates were off 17%.

A five year old Boeing 787-8, on which pricing was under pressure before COVID decimated the airline industry beginning in March, now can be leased for $575,000/mo, ISHKA says.

The Airbus A320/321ceo and Boeing 737-800 also show sharp value and lease rate declines.

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Bjorn’s Corner: Do I get COVID in airline cabins? Part 3.

May 22, 2020, ©. Leeham News: In our Corner series about flying during the COVID-19 pandemic, we look closer at the available research around passengers that fly with virus infections and if these spread to other passengers during a flight.

How much do we know and what are guesses?

Figure 1.

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Better to bring capacity back with a 777-9 or 787-10 if we fly 777-300ER today?

By Bjorn Fehrm

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Introduction

May 21, 2020, © Leeham News: We looked at the economics of extending the lease of a Boeing 777-300ER or taking an ordered 777-9 here.

If traffic post-COVID-19 on the routes we fly stays down for long, should we change the order to a 787-10? What are the trades between staying with the 777-300ER, taking the 777-9, or stepping down to a 787-10?

We use our airliner economic model to find out.

 

Summary:

  • The 787-10 is the safe choice if the fill level for our routes will stay below its passenger capacity for a longer period.
  • This choice is valid for a JFK to Heathrow route. The 787-10 has a shorter range than the 777-300ER and 777-9, so a 787-10 alternative is only possible for routes within its capacity.

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Lessor exposure to Airbus, Boeing wide-bodies

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By Scott Hamilton

May 18, 2020, © Leeham News: As airlines park or retire thousands of aircraft, lessors with wide-body airplanes are most at risk.

Single-aisle airplanes are easier to re-lease and more in demand when traffic recovers. Reconfiguration and maintenance costs, if required, are reasonable by aviation standards. Cabin reconfiguration may run up to $1m. Airframe and engine MRO costs for Airbus A320s and Boeing 737s typically are in the low millions, depending on condition.

MRO and reconfigurations costs for wide-body airplanes, on the other hand, can cost more than a new A320 or 737. GE Aviation GE90s on Boeing 777-200LRs, -300s and -300ERs are notoriously expensive. MRO for Rolls-Royce wide-body engines is costly under RR’s contract packages.

Reconfiguration costs for A330s, 777s and A380s can run up to $30m, depending on the initial operator and who the second (or third) one will be. Therefore, HiFly did not reconfigure the ex-Singapore Airlines Airbus A380 it acquired after SQ retired the airplane.

LNA analyzed the number of wide-bodies owned by lessors. There are more than 670 Airbuses and more than 600 Boeings.

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Pontifications: There is no good news

May 18, 2020, © Leeham News: There simply is no good news in commercial aviation right now.

By Scott Hamilton

Yes, airport traffic is upticking in the USA (and elsewhere) slightly. But in the USA, it’s still less than 10% of last year’s totals.

There remains a tremendous amount of uncertainty.

  • Airbus plans to lay off some 10,000 employees, according to press reports. Another production rate cut seems inevitable.
  • Boeing’s CEO revised the forecast for air traffic recovery from 2-3 years to 3-5 years. Production recovery will take another 2-3 years after that, he said.
  • Embraer’s biggest customer for the E195-E2, Azul Airlines, deferred deliveries from 2020-2023 to 2024. There haven’t been announcements about deferrals by US carriers for E175-E1s, but there is no reason to believe these won’t be deferred.
  • Delta Air Lines says 7,000 of its 14,000 pilots will be surplus to its needs this fall.
  • Spirit Aerosystems laid off about 1,700 employees due to Boeing’s production planning.
  • Qatar Airways will retire 50 airplanes, defer new orders from Airbus and Boeing and cut the workforce by 20%.

The list goes on and on and on.

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Bjorn’s Corner: Do I get COVID in airline cabins? Part 2.

May 15, 2020, ©. Leeham News: In our Corner series about flying during the COVID-19 pandemic, we dig deeper into the knowledge around when a person is infectious and what to do about it in a air travel setting.

Figure 1. Droplet cloud when coughing.

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Better to bring capacity back with a 787-10 or 777-300ER

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By Vincent Valery

Introduction  

May 14, 2020, © Leeham News: Last week, we compared the economics of the Boeing 777-300ER and 777-9 on the world’s busiest intercontinental route. The older aircraft proved a viable alternative, thanks to low fuel prices and low capital costs. We will now turn our attention to the step-down case mentioned in the article.

We will look at the market developments in the twin-aisle market and compare the economics of the 777-300ER with the 787-10 on the JFK to London Heathrow route to find out how attractive such an option is.

Summary
  • 777X hot when launched;
  • A materially different market for customers seven years on;
  • Leads airlines to consider large twin order conversions.

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Analysis: Mitsubishi suspends development of M100, continues M90 due to COVID

By Scott Hamilton

Analysis

May 12, 2020, © Leeham News: Mitsubishi Heavy Industries (MHI) yesterday said it cut development money for the M100 SpaceJet. M100 R&D is suspended indefinitely while it continues for the M90 on half rations.

MHI will continue certification of the M90.

MHI also said it will reevaluate demand for the M100 because of COVID-19 impacts.

This immediately raised questions whether MHI may kill the M100 program.

To do so will squander MHI’s once-in-a-lifetime chance to become a real global power in commercial aviation. If this happens, “Japan Inc.” also loses a chance to be part of this.

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